Thank you, Mr. Chairman.
The Canadian Construction Association welcomes this opportunity to present its views on the proposed new governance and rate-setting reforms for the employment insurance program. We are the national voice of the non-residential construction industry, representing some 20,000 individual firms from coast to coast to coast, 95% of which are small businesses, the majority of them Canadian owned.
The total construction industry in Canada, including the residential sector, directly employs over 1.2 million Canadians, or one out of every 14 working Canadians. Our industry is therefore a major contributor and beneficiary of the current EI program.
Mr. Chairman, CCA supports the proposed reforms as they relate to both the governance of the EI fund and the EI premium rate-setting process. First, the segregation of the EI fund from the consolidated revenue fund ensures that operating surpluses and investment returns remain in the fund and are used for their intended purpose. In addition, the establishment of an arm's-length independent body with private sector financial management experience to manage the fund will maintain its integrity while ensuring that rate-setting decisions are based upon financial considerations.
The proposed changes to the rate-setting process are much improved since, for the first time, the corporation will be able to truly set break-even rates, in that the past performance of the fund and investment returns can now be factored into those calculations that heretofore were not allowed because of the forward-looking restrictions or limitations on the ability of the chief actuary and the commission to set rates. Despite these positive steps, however, there are still further needed reforms relative to premium rates.
CCA believes it is time to reinstate equal premium rates for employees and employers. In other words, eliminate the employer multiple. Prior to 1972, employers and employees made equal contributions to the then unemployment insurance fund. It was only in 1972 that employers started paying a 1.4 multiple. This occurred at the same time as the federal government announced it would cease contributing 20% of the operating program funds.
The apparent rationale behind the employer multiple is that employers have greater control over layoff decisions, thus triggering the payment of EI benefits, and therefore should bear a higher overall share of program costs. In recent years, however, EI benefits totally unrelated to layoffs have been introduced, such as family-related benefits, parental leave, and compassionate family care, which accounted for some 22% of EI expenditures in 2006. In addition, developmental uses or training grants have become a significant part of the program, contributing to much higher program costs, representing 11% of EI expenditures in 2006. In fact, many of the benefits paid by the EI fund currently are now triggered by employee decisions rather than employer decisions.
The rationale for an employer multiple is no longer valid. Eliminate the employer multiple. Equalize employee-employer contributions.
Secondly, employees are refunded for excess contributions over the annual contribution limit, but there is no mechanism in place to refund employer over-contributions. Given the nature of the construction industry, it is not uncommon for a construction employer to operate a group of associated companies. It is also common for the same employee to be engaged by more than one of these associated companies over the course of a year. This group of associated companies is treated as a single entity for tax measures, such as the small business deduction. However, they are treated as different employers for the purposes of the Employment Insurance Act. As a result, especially with the introduction of the accelerated payment system, employers are finding themselves paying more than the maximum levels with no means for a refund, even in situations where the employee is essentially working for the same employer.
We would ask for a mechanism to be introduced to refund over-contributions to employers, which this committee has recommended in the past, and to treat associated companies as a single employer for the purposes of annual EI premium contribution limits and the proposed refund system.
Thank you for your attention. We welcome questions and discussion.